A service provider, such as a bank or other financial institution, a car dealership, a furniture company, or any entity providing goods, services, or funds to a consumer generally provides credit accounts to consumers. A credit account may also be generated by a “point of sale” transaction whereby a consumer tenders a negotiable instrument, such as a check, that is insufficient to cover the required amount of the transaction. These service providers allow the consumers to make purchases on credit rather than using cash. Consumers incur debt with each credit purchase which may be repaid over time according to the terms and conditions of the particular customer's credit account. Credit accounts may include a credit card account that provides a customer with one or more lines of credit, typically including at least one revolving credit line in which the customer may choose either to pay the full amount of debt owed on his account by a specified date or defer payment of at least a portion of the debt to a later date. Credit accounts may also include a loan for a specific purchase, such as an installment loan, or a line of credit from a retailer. The service provider typically charges the customer interest or finance charges for deferred payments during the period of deferral.
The service provider typically establishes a credit limit for each credit account defining the maximum amount of credit available to the customer for making purchases at any given time. When a customer makes a credit card purchase, the amount of credit available to the customer, often called the available balance, is reduced by the amount of the purchase, and the amount of debt currently owed by the customer, often called the outstanding balance, is increased by the amount of the purchase.
Occasionally, a consumer defaults on a credit card, revolving credit account, or installment loan by failing to pay the balance required by the credit agreement between the consumer and the service provider. After a period of time with no payment from the consumer, the service provider is required to write off the balance owed by the consumer as a loss. Write-offs by service providers are commonly called “charged-off” debts in the credit industry. Banks, credit card issuers, and other financial institutions often have difficulty in recovering charged-off debt. Two of the main problems associated with recovering charged-off debt involve establishing communication with a consumer/debtor, and providing a consumer/debtor with an attractive reason to pay the debt. Often, banks, financial institutions, collection agencies, and debt consolidation companies (“service providers”) attempt to establish communication with a consumer through direct-mail offers or telephone solicitation. Attempts to contact consumers in this manner are often unsuccessful, due primarily to the fact that consumers merely see this offer of debt consolidation, or debt repayment, as an additional line of credit often associated with an additional credit card. Therefore, consumers rarely respond to direct mail for offers of credit or debt repayment.
Additionally, consumers are often aware that their debt has been charged off, and though such charge-offs result in damage to the consumer's credit rating and/or credit report, offers to pay off the charged-off debt generally fail to provide attractive incentives for consumers to agree to repayment terms for their otherwise charged-off debt.